The current round of risky asset weakness and rise in volatility been partially blamed on Trumps decision to deploy additional troops into Afghanistan. In reaction to news of his announcement, the VIX spiked to a high of 16, US equities fought to sustain gains (clear weakness in Tech and Financial) while USDJPY slid to 108.60. While the speech provides a meaningful shift in campaign rhetoric the lack of details indicate investors should not assume long term structural consequence. Trump acknowledged that he had been critical of the unending war and advocated total withdrawal but as President his generals persuaded him to avoid creating a power vacuum in Afghanistan.

Some Washington pundits have suggested that this was Trumps attempt to stabilize a turbulent administration (following Bannon’s chaotic exit). However, we suspect that this stark reversal reflects Trumps lack of foreign policy experience and broader agenda. Elsewhere, suggestions that Trump pro-growth agenda is further of track, is a trade that has left the station months ago. In investment terms, our short-term view is the current risk-off trade as unjustified, opting to go long risk. We remain focused on Jackson Hole symposium in expectations that Yellen’s remarks indicating the markets are mispricing Fed-tightening risk.